Selective Transparency: Who is the SEC Really Protecting

The title of this article, âSelective Transparency: Who is the SEC Really Protectingâ relates to the action, or inaction as it may be, as it relates to providing critical information to the public. Before concluding with opinion as to why Forms SH remained in the control of the SEC and were never disclosed to the public, take a look at the following chart which illustrates the date and number of securities remaining on the SHO List with recent correlative market closing prices for the DJIA and NSDQ.

It does not take a rocket scientist to see what transpired between September 17, 2008 and October 17, 2008. Christopher Cox had a pretty good idea when he suggested public disclosure of both the short positions and the entities that controlled those positions that were of a certain size or investment management structure. His proclamation never made it through the weekend before the real powers that be, major Wall Street firms, the DTCC, prime brokers, major hedge funds and institutions, and possibly the investment clients they represent came knocking on his door requesting the public window be closed.

Step back and take a look at the chart. The number of securities on the SHO List has declined dramatically, from a high of 443 on September 22, 2008 to only 74 on October 17, 2008. The DJIA and NSDQ dropped by approximately 20% during this period as well.

Now ask yourself a question; why did the number of securities drop precipitously during this period? Was it because the entities that were naked short securities located bona fide shares to meet the T+3 requirements of their open transactions? I donât think so. Do you think perhaps, since the stock market and the securities that comprise it essentially crashed, that the entities that employed the illegal manipulative techniques of naked short selling just covered their shares at a huge profit? Yes I think that is exactly what happened.

Remember, this all took place under the watchful eye of the SEC and they knew which hedge fund and investment entities were short which securities. The SEC would have known which hedge fund and investment entities were able to secure legal âlocateâ numbers versus those that simply closed out their naked shorts in the marketplace. The initial Form SH order was due prior to the markets opening on September 29, 2008. More than 431 securities remained on the SHO List at that time and the markets had not yet begun to crash. Was there coincidence in all that transpired in the markets or was there something more? We have a couple theories that need a few more weeks of development to be completed but it is apparent that someone did not want the public to know the cards they were holding. Thus, transparency was available to privileged few who again, prospered while the public-at-large remained susceptible to their manipulations. In any case, it is obvious that the information that would answer these questions is available and it is time the public was able to access it.

The last thing any of these hedge fund and investment entities wanted, especially at this most critical time, was transparency. The dissemination of this information would have etched a more negative image of this illegal practice of these hedge fund moneyed market participants. It also would have provided a direct conduit for civil legal action against the perpetrators of naked short selling resulting in the DTCC, the prime brokers and other responsible parties being subject to subpoenas that would open up their transaction books to the public. There actually might have been viable platforms created that âredistributedâ the privatized wealth, the absolute last thing these Robber Barons of todayâs financial markets would ever want to happen. Quite frankly, it is time that it happens. The information is there and it is time to storm the gates of the SEC and get the transparency we all deserve.

There is much more to this story but only so much that anyone reading a blog of this nature has the time to take in and understand. As you have come to know this site, we dig a little deeper than just reporting the news as it relates to the problem. We âconnect the dotsâ and will continue to do so. It was never the fact that securities appeared on the SHO List that created the problem. It was the fact that naked short selling of securities was ever allowed to take place, despite the rules and regulations that prohibited this action that give rise to the list becoming a necessity.

The solution to preventing naked short selling is simple; require a firm âlocateâ number before being able to enter a short sale. While this may solve the naked short selling problem more issues remain. For example, the exploitation of naked short selling has created a plethora of âphantomâ shares that grossly overstate the actual number of shares in existence. How the number of shares in existence is reduced and again accurately relate to the actual number of shares issued and outstanding will be addressed in subsequent articles.

We at AMG appreciate your posting our blog on this site and want you to be aware of what we are embarking upon.

We have established Citizens for Wall Street Reform (âCFWSRâ), a non-profit corporation to consolidate the efforts of all companies and shareholders who have been victimized by the illegal activities of Wall Street. A singular platform of âone voiceâ carrying a unified message from Main Street to government that âWall Street is badly broken and in need of repairsâ maximizes the effort of all involved and amortizes the associated costs.

We have been involved in identifying, investigating and exposing illegal and fraudulent activity in the securities industry for more than 25 years. Our objective is to eliminate illegal Wall Street trading practices and to obtain information in existence that proves the actions of these criminals broke the law. We will lobby for changes in legislation at all levels of government, seek criminal enforcement by galvanized federal and state attorney generals and pursue direct civil action where appropriate. We cannot do it ourselves. We need your help and support.

Grass roots organizations find their roots and strengths in people. People meet with, talk to and exchange ideas and information with one another. Taking this initial communication to the next level, employing the power of the Internet is essential. We embrace this communication tool and ask all participants to do as we have done; to spread the CFWSR message that Wall Street is broken, asking each person they contact to do the same within their own respective on-line communities.